Innovators work hard to understand exactly what value means to their customers so they can generate it. So how exactly do you generate value?

Generating value is one of the most misunderstood tools of innovation. But it’s also one of the most important.

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After all, value is what causes people to want to trade with you. Value is what makes someone decide to take out her wallet and hand you her money, because she’s going to get something she wants–something in which she finds compelling value.

Value isn’t fixed or tangible; it rests in perceived benefit. In other words, value is in the mind of the beholder. This is a key point. Innovators work hard to understand exactly what value means to their customers so they can generate and provide it. Value is an emergent property of supplier and consumer; it cannot take place with only one or the other.

So how exactly do you generate value? A focus on continuous, iterative improvement is not enough. I have identified three different ways to springboard innovations that generate value, which I describe in my book, Getting Innovation Right.

You can create new value; you can create more value; or you can create better value. New value is the most difficult strategy. The second strategy, creating more value, is much easier because you’re working with something you already have. The third strategy, creating better value, is also easier because again, it’s an extension of what you are currently doing.

1. New Value
Although some organizations do it very effectively, creating new value is the most challenging. To create new value requires breaking into a whole new sector.

Here’s an example: an association focused on increasing its membership. Rather than go after incremental gains in its target industry, it could create new value–and recruit new members–by adding a member category for vendors who sell to its industry. New value emerges from the need of members to find suppliers and the need of vendors to access a target market.

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2. More Value
You can generate more value by applying one of three strategies: You can keep the purchase price the same and deliver more with every purchase; you can lower the purchase price and deliver the same quantity of value; or you can do both. Since value is in the mind of the beholder, any of these adjustments shifts that perception in the buyer’s favor. Whenever you can lower the investment and deliver more value, you should. Apple used this strategy when they released their second iPhone at a lower price than their first. That’s an example of creating more value.

3. Better Value
Like more value, better value relies on expanding an existing value. But instead of increasing the quantity, you increase the quality. Specifically, you can create better value with a change in impact, intensity, or application.

Creating better value with impact simply means delivering a more powerful punch behind the value that you currently have. To create better value through impact, change the consequence, the effect, the influence of a benefit your offering delivers.

For example, let’s say that an organization wants to leverage the asset of its quarterly journal. Its strategic response is to take that static printed periodical and turn it into an online forum, where customers are invited to be part of the conversation. The communication vehicle changes from a one-way channel to a multi-voice dialogue. That’s called increasing impact.

Now let’s look at increasing intensity. Intensity means that a benefit the product or service delivers actually does so with more strength, power, or potency. Let’s say that you provide an apartment-cleaning service, and you promised your customers that every apartment that you clean will meet federal and state standards. What if you suddenly promised customers that not only would their units meet federal and state standards, but also exceed the standards of local consumer groups? Now you’re going above and beyond what the law requires, to deliver what consumers actually want. That’s increasing the amount of intensity that your value provides.

Now let’s look at application. This means of providing better value applies the same benefits to a wider variety of uses. Look no further than your local college for an example. As online education has brought higher education within reach of many more people, colleges and universities are porting their classroom instruction over to online learning platforms. Now anyone interested in learning anything has access–not just the traditional student pursuing a specific degree. The benefit once available only to a few is now available worldwide–better value, available for a wider variety of uses.

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Tradition may tell you that value represents the worth of goods or services as determined by the market, but that doesn’t recognize the most fundamental quality of value–that it is subjective, and can change according to circumstance. It’s your job as an innovation leader to identify what drives your customers, and to create offerings around those drivers. Bake in new, more, or better value–or combine these strategies to generate a curve of offerings, at various investment levels and delivering a variety of value propositions.

Pay attention to exactly what customers find compelling. Deliver that compelling offering by finding more, better, or new value, emergent in the coming together of buyer and seller.